Auctions Top Online Fraud Complaints

Online auction houses have taken the dubious honor of generating the most fraud cases on the Internet, according to a survey taken by the U.S. Federal Bureau of Investigation (FBI).

The Internet Fraud Complaint Center (IFCC), a joint undertaking of the FBI and the Department of Justice, said Tuesday that it has received 1,000 complaints per week since it launched in May. The Center expects that total to increase to 1,000 complaints each day once it fully automates and links up with major portals later this year.

Of the 4,000 Internet-generated cases the FBI said it has referred to local law enforcement authorities, roughly half involve online auctions, a parallel to the enormous spike in traffic and transactions at auction sites like eBay (Nasdaq: EBAY), by far the largest operating on the Web.

The IFCC said victims lost an average of $800 (US$) for every fraudulent Internet auction transaction that was reported to them. Illustrating the geographic inclusion of the Internet, the IFCC has received complaints from every state in the U.S., with California, Texas and Florida leading the way.

Fraud Odds Slim, But Growing

eBay says only one in every 40,000 listings on its site results in a fraud case, according to published reports. The company reimburses users for confirmed incidents of fraud through its insurance carrier. The auction giant hosts 4,320 categories listing 450,000 new items and four million auctions a day.

Law enforcement authorities have been hard pressed to keep up with the surge in Internet-generated crime. Their initial concentration was on tracking pedophiles and stalkers, but the potential for white-collar crimes has expanded exponentially in recent years.

Most police forces lack the resources and money to train and equip officers, and rely increasingly on overburdened state and federal agencies for help.

Legislation Introduced

U.S. Senator Patrick Leahy of Vermont recently introduced a bill that would provide $25 million for training local law enforcement officials to combat Internet crime. That bill has yet to be addressed by the Senate Judiciary Committee.

The National White Collar Crime Center, run by the Justice Department, has requested that Congress double its budget to $18 million next year. The cumulative total of Leahy's bill and the sum sought by the center amounts to $43 million.